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What are the modes of payment allowed for receiving Foreign Direct Investment in an Indian company?

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What are the modes of payment allowed for receiving Foreign Direct Investment in an Indian company?
posted Aug 3, 2017 by Abu Anam

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1 Answer

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An Indian company issuing shares/ convertible debentures to a person resident outside India shall receive the amount of consideration by:
a. inward remittance through normal banking channels;
b. debit to NRE/ FCNR (B) account of a person concerned maintained with an AD Category I bank;
c. debit to non-interest bearing Escrow account in Indian Rupees in India which is opened with the approval from AD Category – I bank and is maintained with the AD Category I bank on behalf of residents and non-residents towards payment of share purchase consideration;
d. conversion of royalty/ lump sum/ technical know-how fee due for payment or conversion of ECB;
e. conversion of pre-incorporation/ pre-operative expenses incurred by the a non-resident entity up to a limit of five percent of its capital or USD 500,000 whichever is less;
f. conversion of import payables/ pre incorporation expenses/ can be treated as consideration for issue of shares with the approval of FIPB;
g. against any other funds payable to a person resident outside India, the remittance of which does not require the prior approval of the Reserve Bank or the Government of India: and
h. Swap of capital instruments, provided where the Indian investee company is engaged in a Government route sector, prior Government approval shall be required

If the shares or convertible debentures are not issued within 180 days from the date of receipt of the inward remittance or date of debit to NRE/ FCNR (B)/ Escrow account, the amount shall be refunded. Further, Reserve Bank may on an application made to it and for sufficient reasons permit an Indian Company to refund/ allot shares for the amount of consideration received towards issue of security if such amount is outstanding beyond the period of 180 days from the date of receipt.

answer Aug 8, 2017 by Shubham Rajput